Illinois’s Predatory Loan Prevention Act: The Impacts of the State’s 36% Rate Cap

In 2021, the Predatory Loan Prevention Act capped the annual percentage rate on consumer loans in Illinois at 36% in a victory for efforts at eliminating structural racism. A new report from Woodstock Institute examines how Illinois consumers, especially those from low-income communities and communities of color, have benefited from the law.

Executive Summary

1. The PLPA dramatically cut interest rates on nearly all types of consumer loans in Illinois.

2. In 2019, consumers paid $607.4 million in interest and fees on payday loans, installment payday loans, auto title loans, and small consumer loans. In 2022, consumers paid $1,279 on these same loans – a savings of more than $600 million.

3. Black, Brown, and lower income borrowers paid a disproportionate share of interest and fees on high-cost loans before the PLPA. Accordingly, Black, Brown and lower income borrowers received a disproportionate share of the savings from the PLPA.

4. Prohibiting predatory payday loans has eliminated racial, ethnic, and economic disparities with respect to payday lending in Illinois.

5. After the PLPA, the payday lenders, auto title lenders, and high-cost installment lenders closed while more affordable installment lenders expanded their business in Illinois. Since the PLPA, there are 172 new lender licenses/branches.

6. A for-profit lender and a not-for-profit lender reported that, after the PLPA, they saw an increase in applications. The increased number of applications did not negatively impact loan origination rates. The not-for-profit lender saw a dramatic increase (70%) in originations.

7. A scientific poll found that Illinoisans overwhelmingly support the PLPA rate cap: 86% support, 6% oppose.

8. In the same poll, more than three-quarters of respondents reported that they handled their need for cash after the PLPA without cutting back on essential expenditures. Comparable data for before the PLPA does not exist.

9. Comparing a period before the PLPA to periods after the PLPA, bankruptcy filings decreased more in Illinois than in any other state in the region.

10. Access to credit can have a negative outcome when borrowers acquire more debt than they can afford. Data through the end of 2022 show that younger borrowers are increasingly unable to repay their auto loans and credit card bills, and that was before student loan repayment resumed at the end of the year.